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Should union pensions be cut?

By Jennie L. Phipps · Bankrate.com
Friday, June 6, 2014
Posted: 4 pm ET

Congress is expected soon to consider the recommendations of a coalition of unions, pension administrators and employers supporting tough measures to save its pensions. The National Coordinating Committee on Multiemployer Plans, or NCCMP, offers several solutions to the problem of pension underfunding in its report, "Solutions not bailouts."

One of its solutions calls for drastic cuts to the benefits of current as well as future recipients.

"Find a better solution," says Karen Ferguson, director of the nonprofit Pension Rights Center. She calls the suggested cuts "draconian. ... They are saying to older people with no other resources -- many barely making it already -- 'We’re going to break the promise that you would have a secure lifetime income.' It's unconscionable."

Multiemployer pension plans require companies that employ union workers in a particular industry to contribute to the retirement plans at levels negotiated through union bargaining. When employees retire, they receive benefits from the pooled contributions. Many of the 1,510 active multiemployer old-fashioned, defined benefit pension plans covering about 10 million participants are in good shape. But some of them -- notably, some of the largest -- are deeply troubled. The Pension Rights Center estimates that 150 to 200 plans covering 1.5 million workers could run out of money in the next 20 years, according to information from the Pension Benefit Guaranty Corporation, or PBGC, the quasi-government organization that guarantees private pensions.

One pension fund facing eventual bankruptcy

The Teamsters' Central States Pension Fund is one of the largest multiemployer plans -- and one of the least solvent. The plan covers 212,000 retirees and about 65,000 current workers, and it reportedly has liabilities that are nearly double its assets. If nothing is done, Central States' Executive Director Tom Nyhan told Congress in 2010 that the fund will be bankrupt in "10 to 15 years," a retirement planning disaster.

One solution crafted by NCCMP would cut average current pensions by at least two-thirds, Ferguson says. Her organization has posted two online calculators, and she is urging union members and their families to plug in what they currently are receiving or expect in pension benefits and see what the proposal would do to that number. A second calculator shows what would happen if the PBGC took over. Note that the PBGC guarantees multiemployer pensions at a much lower level than it guarantees single-employer pension plans.

How retiree pensions may look after cutbacks

Monthly Annual
Typical Teamster pension $3,000.00 $36,000.00
Pension after NCCMP* cutbacks $983.13 $11,797.50
Pension if PBGC** takes over $893.75 $10,725.00

*NCCMP = National Coordinating Committee on Multiemployer Plans

**PBGC = Pension Benefits Guaranty Corporation

Source: Pension Rights Center. Calculations assume 25-year work history.

Ferguson's organization supports other changes to the plans to improve their financial stability, including thoroughly analyzing each plan to evaluate exactly how insolvent it is and what can be done to fix that plan specifically. She's in favor of allowing more mergers among plans to cut administrative costs, and also advocates getting rid of the "13th" bonus check, an extra check that retirees get at the end of a year if the pension fund performed better than expected. They date from the time when these plans were overfunded and in some cases are still mandated.

The Pension Rights Center also suggests finding new ways to raise money, including increasing the PBGC's employer premiums and, perhaps, spending tax dollars. In its report, the center writes: "Plans are facing funding stresses in large measure because of the actions of financial institutions that caused the recession. Our country infused money into those institutions. Should consideration be given to assisting troubled pension plans that are facing problems not of their own making?"

Says Ferguson, "These are problems that can be solved over the long term. There are lots of ways to go, but cutting benefits to the already retired shouldn't be one of them."

What do you think? Is it fair to cut pensioners' benefits after they've already begun receiving them?

Read more about multiemployer plans.

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206 Comments
Paul McLaughlin
November 19, 2014 at 5:41 pm

I am retired receiving my earned 30 year pension. My wife and I cannot survive if my pension is cut. PLEASE do not let this happen.. What about all the years we paid our dues. We deserve and worked hard and long to have our full promised pensions. Millions of retirees should not be hurt because of these problems. Once again PLEASE do not let this happen to retirees pensions.

Toni Risalvato
July 18, 2014 at 2:08 pm

Congressman Kline and Roe are listening to lobbyists for NCCMP and Central Sts Pension Fund to gut ERISA anti cutback law. And give Trustees of Fund power to immediately slash retirees pensions by 30% per Al Nelson, Benefits Director of Fund. Solutions Not Bailouts plan written by lobbyists for NCCMP. Says they want to slash by 5-10% They are lying to Congress to get this legislation through. Why must retirees face financial harm when they cannot supplement loss in income due to age, health considerations. Where is the sacrifice in earnings of Fund head Nyhan and his board of Trustees in this legislation? Nowhere. Yellow Frt Sys. one of NCCMP speaks of dire conditions of company. Scares employees into new contract terms. And then showers top executives with bonus's 1 million to 800,000. What does that say about their ethics and management.Congress is being mislead by bad players who merely want a windfall in revenue in their pockets on the backs of retirees and workers benefits. All Rep. Kline and Roe care about is appeasing corporate America. Little consideration of the harm they are placing on vulnerable retirees who cannot make up the loss in income or plan for future as workers can. This is a travesty in the works. I questions just what the perks are to these Congressmen to do this in light of the ramifications to seniors. Term limits needed, as they are only listening to lobbyists.

Kevin
June 21, 2014 at 11:12 pm

Why in the "HELL" did I pay all those dues for all those years ?
I didn't know that my local was an, over priced employment agency !!!

O’Daniel, Joseph
June 18, 2014 at 11:23 am

I think we have government putting its two cents worth in too many things. Corporations/business members can do a better job. We need to get those members of congress who are in the back pocket of unions out of office,

Michael
June 17, 2014 at 9:23 am

The thing is this can be fixed!!! There are ideas to fix this problem. PRC,TDU,AARP, have come up with ways this can be fixed. The way of congress is to cut.Check these websites out for solutions to the problem not cutbacks. It will be very tough to survive if congress alouds the cut. Sign the petitions. E-mail your congressman. We have to throw our support behind these groups.

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